I am a reporter and researcher focused on energy, political and economic issues in the Mediterranean and have spent much of the last fifteen years working and reporting from the region. Over the last several years, my work has focused on all facets of the energy sector, including investment, development and policy issues. I am a graduate of the University of Texas’ School of Journalism and New York University’s Center for European and Mediterranean Studies graduate program. https://twitter.com/coatschristophe

Where Does Algeria's National Election Leave Its Energy Future? (And Europe's)

Late last week, Algeria’s President Abdelaziz Bouteflika claimed victory once again with a little over 80 percent of the country’s vote, setting in motion a fourth five-year term for the ailing North African leader.

On the surface, Bouteflika’s solid win should be in line with what energy consumer governments in the West would have hoped for, offering consistency and apparent stability for one of Africa’s largest oil and gas producers. At a time when much of Europe is looking anywhere it can to ease dependence on Russian reserves, consistency and possible growth from producers like Algeria is more important than ever. This is especially true as political upheaval in neighboring Libya continues to slow energy output to a trickle for eager EU consumers.

However, these latest election results have arrived with a significant amount of concern from inside the country and out. With political tension on the rise and energy production continuing to decline under pressure of corruption and dwindling investor confidence, Algeria is on unsure footing and it’s unclear whether another five years of Bouteflika will set things right.

Who Is Leading?

To be fair, the 77-year old leader is unlikely much of a leader these days – for better or worse. Having suffered a stroke last Spring, Bouteflika has scarcely been seen in public since, leaving the pressures of campaigning to surrogates and supporters. While he has been the face of the country’s leadership since the end of a bloody civil war that left nearly a quarter million Algerians dead in the 1990s, Bouteflika is unlikely much of a force of political change these days. Instead, the country’s security and business leaders are seen as the ‘guardians of stability’, according to a Reuters report.

However, that stability has come recently come into question as the country’s leadership continues to struggle with slow economic growth and declining energy production, amid corruption investigations that have recently extended beyond the country’s borders.

Africa’s second largest oil producer behind Nigeria, Algeria’s oil production stood at 1.14 million barrels per day in November of last year, down 15% from 2005-2010 averages. Meanwhile, the country’s gas production has declined steadily since 2005 to 2.9 trillion cubic feet in 2011. This pattern has left the country’s reserves mostly unchanged over the last decade, with coveted exports to Europe continuing to decline. The loss of interest on the part of foreign partners and its impact on production levels would be of concern in any country, but Algeria’s is of grave concern considering the country’s heavy dependence on oil and gas for over 95 percent of their export revenue, 60 percent of budget revenues and 30 percent of GDP.

The industry decline, explained Abdelhamid Zerguine, head of Algeria’s state-backed energy firm Sonatrach , was due to the country’s awarding of some permits to small operators that did not have the “financial capacity” to meet the requirements of local projects, leaving them “overstretched”.

Beyond the official government response, the energy sector’s troubles have been attributed to an increasingly inhospitable climate for foreign investors, made worse by a series of corruption investigations related to Sonatrach, which holds a 51 percent minimum stake of all energy projects. Most recently, Sonatrach was swept up in a bribery investigation involving payoffs from Italy’s Eni and their local subsidiary Saipem, which has brought the attention of Italian courts.

Calls for a reassessment of the country’s approach to revenue sharing and taxes finally resulted in legislative action last year, though reforms were limited to supporting offshore and shale efforts in the country.

The landscape for foreign firms worsened last year when regional unrest spilled over Algeria’s borders in the form of an armed attack on a BP-Statoil held gas facility near the Libyan border. The January 2013 attack and military response left dozens dead and some companies reassessing their presence in the region – or at least their willingness to field international staff. The effect of this uncertainty can be seen most clearly in the modest interest from foreign firms during the country’s last two licensing rounds.

This all comes at a particularly inopportune time for Europe, who have looked to North African producers over the last five years as a viable replacement for Russian reserves – or at least something the could ease an uncomfortable dependence on Moscow. Instead, EU consumers have witnessed energy efforts collapse under the weight of Arab Spring instability in places like Libya. In addition to Europe’s hopes for a broader import base, countries like Italy and Spain look to North African producers for significant amounts of their existing natural gas needs.

Largely escaping the political transitions of the last four years, Algeria had been a regional exception. However, as Bouteflika has been unable to reverse the country’s downward trends over the last five years, it’s uncertain what he has to offer for the next five. And that’s bad news for EU energy consumers in search of alternatives.

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